Category Archives: Hi-Shear Technology Corp. HSR

In some markets, there are only a few companies that can really get the job done to tolerances and expectations. These companies attract the best and brightest of employees to develop some of the most exacting products. In a general sense, this is the world of the elite product manufacturer, a manufacturer that generally has a captive customer base desiring a very specific product.

Hi-Shear Technology Corp., a pyrotechnic device developer and manufacturer, works to develop and manufacture explosive devices for space and military applications. The company works primarily in space vehicle and military applications but has solid high tolerance manufacturing capabilities oriented toward any milling application.

The general perception of a company working with military pyrotechnics is that of making bombs and other destructive items on a larger explosive scale. For the most part, hi-shear works at the opposite end of the pyrotechnic spectrum (so to speak.) The company’s product line is diverse, but generally revolves around separation applications where portions of an air or space vehicle need to separate in a safe and controlled way. This would include seat ejectors for front line fighter aircraft, stage separation systems for launch vehicles and bolt/clamp explosives in various applications. For the larger scope of military pyrotechnics, the company manufactures a wide array of high energy firing units. These products would range from vertical launch Tomahawk and Cruise missile systems to laser arming and firing systems.

Although the company does seek out business derived from the private sector, owing to its expert capabilities in manufacturing products at high tolerances, its primary customers tend to be governments or large corporations with grand designs. As such, the company tends to have a reliable customer base less exposed to the vagaries of a shifting economy. This is not to suggest that the company is not exposed to spending trends within this sector, but rather that longer term spending cycles are more the norm.

Generally, the company finds a rather captive customer base requiring specialized products and services. From all appearances, Hi-Shear Technology Corp. has a solid base of customers and is ready to capitalize in the near and longer term.

Hi-Shear Technology Corporation (AMEX: HSR) is a designer and manufacturer of pyrotechnic, mechanical, and electronic products for the aerospace industry, national defense and other applications where pyrotechnic power is desirable. Their advanced systems and products are used worldwide in space exploration vehicles, satellites, launch vehicles, defensive and offensive missile systems, tactical weapons, and first-line fighter aircraft.

The company’s innovative products include ultra-low shock and electric separation mechanisms, dual-channel safe arm fire devices, and acoustic firing units and the code transmitters to activate them. By developing such products and advanced systems, Hi-Shear has enabled men to land on the moon, rovers to explore the planet Mars, and humans to occupy the international space station in orbit.

Hi-Shear is the established main source for the NASA Standard Initiator (NSI) used for all initiation functions on the space shuttle. The NSI performs from an incredible low temperature of -420 degrees Fahrenheit to as high as +320 degrees Fahrenheit, and only NASA distributes the NSI.

The NASA Standard Detonator (NSD) is used for all detonating functions on the space shuttle. Hi-Shear is the primary qualified source for these detonators, which are a combined NASA Standard Initiator with a hermetically sealed detonating module. Hi-Shear detonators are designed to transfer shock waves and high pressure energies for initiating detonating trains, shielded mild detonating cord (SMDC), flexible confined detonating cord (FCDC), and other linear explosive lines. These are just a few products that Hi-Shear has supplied to various high-level agencies throughout the United States.

The Most Recent Quarter ended November 2007 has been nearly pyrotechnic for this company. Net income has jumped 67%, while sales have grown by about a third. The stock market has responded as can be expected to this spectacular business performance. However, there is more than commerce in owning and holding this stock from the Aerospace & Defense Industry.

The company provides pyrotechnic canisters and firing systems to NASA and the US Air Force. The technology of emitting colored flares has important civilian applications as well. The business is relevant for all military and strategic allies of the United States. Applications related to satellites and other activities in outer space make this small capital stock of today a potential block-buster of the future.

The company is a leader in ordnance and electronic products and systems. It has vast in-house development capabilities. It has a classified facility to manufacture and store its specialized and sensitive products. The technical capabilities of this company make it a strategic resource for the United States.

There are adequate financial attractions to own this stock, apart from patriotic fervor. The Price to Free Cash Flow on Trailing Twelve Months Basis is 134.10. The Dividend Yield is 3.16 against 1.82 for the Aerospace & Defense Industry. The Payout Ratio has been 93.49 over the last four quarters, during which period the entire Capital Goods Sector could manage just 19.02. Management has accelerated Capital Spending by over 75% over the past five years. Investors can therefore anticipate a bright future for this stock.